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Sunday, April 15, 2012

Weak demand in China means trouble for Aussie

The Aussie fell today on disappointing Chinese data  while the Euro dipped, remaining vulnerable to Spanish  bond pressure.
Disappointing Chinese GDP data saw the Euro and  the Australian Dollar dip today. The Euro remained  vulnerable to Euro zone debt concerns, however it  is not expected to break out of its recent trading  range as against the Dollar.
  Australia's economy is commodity driven and as such  is also reliant on Chinese demand. Chinese data  exerts a strong influence on the Aussie, which came  under pressure, after data showed that China's economy  grew below forecasts of 8.3% at 8.1% in the first  quarter of 2012. This represents the slowest expansion  in almost three years for China's economy, the world's  second-largest.
  China has been affected by a drop in demand in key  markets including Europe and the US. Simultaneously,  domestic demand has proved difficult to stimulate.
  Yesterday, the World Bank had warned that China's  economy may slow further in the coming months. It  cautioned key risks to growth in the future are  a slowdown in Beijing's key export markets and  an ongoing correction in China's property markets.
  Earlier today, the Australian Dollar had fallen 0.4%  to US$1.0391
  Speculation of another round of quantitative easing  (QE) from the U.S. Federal Reserve, which is likely  to support riskier assets, has left many analysts  with the view that the Aussie's fall may be temporary.
  The Euro remains vulnerable to any sudden blowouts in  Spanish bond yields. The yields have climbed in recent  weeks on concerns over Spain's fiscal position. Many  economists predict that the European Central Bank  (ECB) will be forced to resume its so called Securities  Markets Program to contain bond yields.
  Some analysts are of the view that the ECB buying  bonds is a way of pulling markets back from severe  stress, however the risk of this is that the market  sees it as more negative than positive.
  Concerns over Euro zone debt issues receded slightly  on Thursday, when Italy cleared its latest round of  bond auctions, however the Spanish 10-year yields  continued to trade just below 6%.
  Markets remain wary about the Euro, with a sense that  the old issues are returning to the Euro-region.  The Euro was down 0.2% to the Dollar earlier today,  at $1.3156.
  The major currencies today have shown no reaction to  news that North Korea's much hyped long-range rocket,  launched earlier in the day, had crashed into the sea  shortly after launch.
  The Dollar remained steady against the Yen at 80.90,  having extending gains since Wednesday's 6 week low  of 80.57 Yen.
  The markets were also waiting on U.S.CPI inflation  data due at 12:30 GMT. In the opinion of many analysts,  any sign of stronger inflation might limit the Fed's  scope to ease policy further.

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